UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2004.
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to .
Commission file number 1-2691.
American Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1502798
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, (817) 963-1234
including area code
Not Applicable
(Former name, former address and former fiscal year , if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Exchange Act Rule 12b-2). Yes X No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $1 par value - 1,000 shares as of April 16, 2004.
The registrant meets the conditions set forth in, and is filing
this form with the reduced disclosure format prescribed by,
General Instructions H(1)(a) and (b) of Form 10-Q.
INDEX
AMERICAN AIRLINES, INC.
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations -- Three months ended March
31, 2004 and 2003
Condensed Consolidated Balance Sheets -- March 31, 2004 and
December 31, 2003
Condensed Consolidated Statements of Cash Flows -- Three months
ended March 31, 2004 and 2003
Notes to Condensed Consolidated Financial Statements -- March 31, 2004
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In millions)
Three Months Ended March 31,
2004 2003
Revenues
Passenger $ 3,678 $ 3,394
Regional Affiliates 420 326
Cargo 148 134
Other 257 254
Total operating revenues 4,503 4,108
Expenses
Wages, salaries and benefits 1,521 1,989
Aircraft fuel 748 682
Regional payments 433 371
Depreciation and amortization 285 297
Other rentals and landing fees 275 268
Commissions, booking fees and credit
card expense 288 255
Maintenance, materials and repairs 196 195
Aircraft rentals 148 184
Food service 136 148
Other operating expenses 498 597
Special charges - 25
Total operating expenses 4,528 5,011
Operating Loss (25) (903)
Other Income (Expense)
Interest income 14 13
Interest expense (160) (149)
Interest capitalized 17 18
Related party interest - net - 3
Miscellaneous - net (28) (14)
(157) (129)
Loss Before Income Taxes (182) (1,032)
Income tax - -
Net Loss $ (182) $ (1,032)
The accompanying notes are an integral part of these financial statements.
-1-
AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (In millions)
March 31, December 31,
2004 2003
Assets
Current Assets
Cash $ 149 $ 118
Short-term investments 3,058 2,474
Restricted cash and short-term investments 501 527
Receivables, net 929 760
Inventories, net 451 475
Other current assets 221 232
Total current assets 5,309 4,586
Equipment and Property
Flight equipment, net 12,670 12,803
Other equipment and property, net 2,317 2,344
Purchase deposits for flight equipment 277 277
15,264 15,424
Equipment and Property Under Capital Leases
Flight equipment, net 1,262 1,279
Other equipment and property, net 82 86
1,344 1,365
Route acquisition costs and airport operating and
gate lease rights, net 1,214 1,221
Other assets 3,879 3,875
$ 27,010 $ 26,471
Liabilities and Stockholder's Equity
Current Liabilities
Accounts payable $ 960 $ 910
Accrued liabilities 1,919 1,840
Air traffic liability 3,201 2,799
Payable to affiliates, net 168 153
Current maturities of long-term debt 467 465
Current obligations under capital leases 164 170
Total current liabilities 6,879 6,337
Long-term debt, less current maturities 9,177 9,073
Obligations under capital leases, less
current obligations 1,111 1,156
Pension and postretirement benefits 4,720 4,803
Other liabilities, deferred gains and
deferred credits 4,671 4,757
Stockholder's Equity
Common stock - -
Additional paid-in capital 3,329 3,023
Accumulated other comprehensive loss (910) (893)
Retained deficit (1,967) (1,785)
452 345
$ 27,010 $ 26,471
The accompanying notes are an integral part of these financial statements.
-2-
AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions)
Three Months Ended March 31,
2004 2003
Net Cash Provided (Used) by Operating Activities $ 298 $ (614)
Cash Flow from Investing Activities:
Capital expenditures, including purchase
deposits for flight equipment (79) (158)
Net (increase) decrease in short-term investments (584) 730
Net decrease in restricted cash and
short-term investments 26 233
Proceeds from sale of equipment and property 10 28
Other (12) 22
Net cash (used) provided by investing activities (639) 855
Cash Flow from Financing Activities:
Payments on long-term debt and capital
lease obligations (129) (190)
Proceeds from issuance of long-term debt 180 -
Funds transferred from affiliates, net 321 5
Net cash provided (used) provided by
financing activities 372 (185)
Net increase in cash 31 56
Cash at beginning of period 118 100
Cash at end of period $ 149 $ 156
Activities Not Affecting Cash
Flight equipment acquired through seller financing $ - $ 134
The accompanying notes are an integral part of these financial statements.
-3-
AMERICAN AIRLINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, these
financial statements contain all adjustments, consisting of normal
recurring accruals unless otherwise disclosed, necessary to present
fairly the financial position, results of operations and cash flows
for the periods indicated. Results of operations for the periods
presented herein are not necessarily indicative of results of
operations for the entire year. American Airlines, Inc. (American
or the Company) is a wholly owned subsidiary of AMR Corporation
(AMR). For further information, refer to the consolidated financial
statements and footnotes thereto included in the American Airlines,
Inc. Annual Report on Form 10-K for the year ended December 31,
2003 (2003 Form 10-K). Certain amounts have been reclassified to
conform with the 2004 presentation.
2.The Company accounts for its participation in AMR's stock-based
compensation plans in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25)
and related Interpretations. Under APB 25, no compensation expense
is recognized for stock option grants if the exercise price of the
Company's stock option grants is at or above the fair market value
of the underlying stock on the date of grant. The Company has
adopted the pro forma disclosure features of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), as amended by Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." The following table
illustrates the effect on net loss if the Company had applied the
fair value recognition provisions of SFAS 123 to stock-based
employee compensation (in millions):
Three Months Ended March 31,
2004 2003
Net loss, as reported $(182) $(1,032)
Add: Stock-based employee compensation
expense included in reported net loss 11 (3)
Deduct: Total stock-based employee
compensation expense determined
under fair value based methods for
all awards (27) (7)
Pro forma net loss $(198) $(1,042)
3.As of March 31, 2004, the Company had commitments to acquire 47
Boeing 737-800s and nine Boeing 777-200ERs in 2006 through 2010.
Future payments for all aircraft, including the estimated amounts for
price escalation, will approximate $106 million in 2005, $654 million
in 2006 and an aggregate of approximately $2.0 billion in 2007 through
2010.
The Company is subject to environmental issues at various airport
and non-airport locations for which it has accrued, in Accrued
liabilities on the accompanying condensed consolidated balance
sheets, $75 million and $72 million at March 31, 2004 and December
31, 2003, respectively. Management believes, after considering a
number of factors, that the ultimate disposition of these
environmental issues is not expected to materially affect the
Company's consolidated financial position, results of operations or
cash flows. Amounts recorded for environmental issues are based on
the Company's current assessments of the ultimate outcome and,
accordingly, could increase or decrease as these assessments
change.
-4-
AMERICAN AIRLINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
In 2003, the Company reached concessionary agreements with certain
lessors. Certain of these agreements provide that the Company's
obligations under the related leases revert to the original terms
if certain events occur prior to December 31, 2005, including: (i)
an event of default under the related lease (which generally occurs
only if a payment default occurs), (ii) an event of loss with
respect to the related aircraft, (iii) rejection by the Company of
the lease under the provisions of Chapter 11 of the U.S. Bankruptcy
Code or (iv) the Company's filing for bankruptcy under Chapter 7 of
the U.S. Bankruptcy Code. If any one of these events were to
occur, the Company would be responsible for approximately $45
million in additional operating lease payments and $65 million in
additional payments related to capital leases as of March 31, 2004.
This amount will increase to approximately $119 million in
operating lease payments and $111 million in payments related to
capital leases prior to the expiration of the provision on December
31, 2005. These amounts are being accounted for as contingent
rentals and will only be recognized if they become payable.
Financial Accounting Standards Board Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others"
(Interpretation 45), requires disclosures in interim and annual
financial statements about obligations under certain guarantees
issued by the Company. The disclosures required by Interpretation
45 were included in Notes 4, 5 and 6 to the consolidated financial
statements in the 2003 Form 10-K. There have been no significant
changes to such disclosures.
4.Accumulated depreciation of owned equipment and property at March
31, 2004 and December 31, 2003 was $8.0 billion and $7.8 billion,
respectively. Accumulated amortization of equipment and property
under capital leases at March 31, 2004 and December 31, 2003 was
$1.1 billion.
5.As discussed in Note 8 to the consolidated financial statements in
the 2003 Form 10-K, the Company has a valuation allowance against
the full amount of its net deferred tax asset. The Company's
deferred tax asset valuation allowance increased $71 million during
the three months ended March 31, 2004 to $1.1 billion as of March
31, 2004.
6.In February 2004, American issued $180 million of Fixed Rate
Secured Notes due 2009. These notes are secured by certain spare
parts (with a net book value of $224 million as of March 31, 2004)
and bear interest at 7.25 percent.
Also in February 2004, AMR issued $324 million principal amount of
4.50 percent senior convertible notes due 2024. Each note is
convertible into AMR common stock at a conversion rate of 45.3515
shares per $1,000 principal amount of notes (which represents an
equivalent conversion price of $22.05 per share), subject to
adjustment in certain circumstances. The notes are convertible
under certain circumstances, including if (i) the closing sale
price of AMR's common stock reaches a certain level for a specified
period of time, (ii) the trading price of the notes as a percentage
of the closing sale price of AMR's common stock falls below a
certain level for a specified period of time, (iii) AMR calls the
notes for redemption, or (iv) certain corporate transactions occur.
Holders of the notes may require AMR to repurchase all or any
portion of the notes on February 15, 2009, 2014 and 2019 at a
purchase price equal to the principal amount of the notes being
purchased plus accrued and unpaid interest to the date of purchase.
AMR may pay the purchase price in cash, common stock or a
combination of cash and common stock. After February 15, 2009, AMR
may redeem all or any portion of the notes for cash at a price
equal to the principal amount of the notes being redeemed plus
accrued and unpaid interest as of the redemption date. These notes
are guaranteed by American. If the holders of these notes or AMR's
4.25 percent senior convertible notes due 2023 require AMR to
repurchase all or any portion of the notes on the repurchase dates,
it is AMR's present intention to satisfy the requirement in cash.
As of March 31, 2004, AMR has issued guarantees covering
approximately $932 million of American's tax-exempt bond debt and
American has issued guarantees covering approximately $1.3 billion
of AMR's unsecured debt. In addition, as of March 31, 2004, AMR
and American have issued guarantees covering approximately $484
million of AMR Eagle's secured debt.
-5-
AMERICAN AIRLINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
7.The following table provides the components of net periodic
benefit cost for the three months ended March 31, 2004 and 2003 (in
millions):
Other Postretirement
Pension Benefits Benefits
2004 2003 2004 2003
Components of net periodic
benefit cost
Service cost $ 89 $ 109 $ 19 $ 24
Interest cost 142 152 51 56
Expected return on assets (142) (118) (3) (2)
Amortization of:
Prior service cost 4 7 (3) (2)
Unrecognized net loss 14 32 2 5
Net periodic benefit cost $ 107 $ 182 $ 66 $ 81
The Company expects to contribute a minimum of approximately $433
million and $412 million to its defined benefit pension plans in
2004 and 2005, respectively. The Company's estimates of its defined
benefit pension plan contributions reflect the provisions of the
Pension Funding Equity Act of 2004, which was enacted in April
2004. Of the $433 million minimum amount the Company expects to
contribute to its defined benefit pension plans in 2004, the
Company contributed approximately $213 million during the three
months ended March 31, 2004 and an additional $106 million on April
15, 2004.
In December 2003, the President signed the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (the Modernization
Act), which introduces a prescription drug benefit under Medicare
into law. In January 2004, the Financial Accounting Standards Board
(FASB) issued a FASB Staff Position which permits companies to
elect to defer accounting for the effects of the Modernization Act.
The Company has not elected this deferral and has recognized the
effect of the Modernization Act in the calculation of its
postretirement benefit liability as of December 31, 2003. The
effect of the Modernization Act was to reduce the Company's
accumulated postretirement benefit obligation (APBO) by $415
million by decreasing unrecognized net actuarial losses. This
decrease is due to a reduction in the expected per capita claims
cost along with a reduction in the expected rates of participation
in the plan. The decrease in the APBO is reflected in the Company's
2004 postretirement benefits expense through amortization of
unrecognized gains/losses. Additionally, the service and interest
cost components of the Company's 2004 postretirement benefits
expense have been reduced as a result of the Modernization Act. The
effect of the Modernization Act was to decrease the Company's full
year 2004 postretirement benefits expense by approximately $60
million. Final authoritative guidance on accounting for the
Modernization Act has not been issued and could require the Company
to change previously reported information.
-6-
AMERICAN AIRLINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
8.During the last three years, as a result of the events of September
11, 2001 and the Company's continuing restructuring activities, the
Company has recorded a number of special charges related to
aircraft charges, facility exit costs and employee charges. Special
charges for the three months ended March 31, 2003 included employee
severance charges related to the Company's 2002 restructuring
initiatives. The following table summarizes the changes in the
remaining accruals for these charges (in millions):
Aircraft Facility Employee
Charges Exit Costs Charges Total
Remaining accrual
at December 31, 2003 $ 194 $ 56 $ 26 $ 276
Payments (27) (2) (4) (33)
Remaining accrual
at March 31, 2004 $ 167 $ 54 $ 22 $ 243
Cash outlays related to the accruals, as of March 31, 2004, for
aircraft charges, facility exit costs and employee charges will
occur through 2014, 2018 and 2004, respectively.
9.The Company includes changes in the fair value of certain
derivative financial instruments that qualify for hedge accounting,
changes in minimum pension liabilities and unrealized gains and losses
on available-for-sale securities in comprehensive loss. For the three
months ended March 31, 2004 and 2003, comprehensive loss was $199
million and $1.1 billion, respectively. The difference between net
loss and comprehensive loss for the three months ended March 31, 2004
and 2003 is due primarily to the accounting for the Company's
derivative financial instruments.
10.American classifies certain receivables from its parent and
affiliates against paid-in-capital. In February 2004, AMR
transferred the proceeds from its 4.5 pecent senior convertible
notes due 2024 to American, reducing American's receivable from AMR
by approximately $315 million. As of March 31, 2004, the Company
classified a $77 million receivable from its parent against paid-in-
capital on the accompanying condensed consolidated balance sheet.
Comparatively, as of December 31, 2003, the Company classified a
$383 million receivable from its parent against paid-in-capital on
the accompanying condensed consolidated balance sheet.
-7-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Forward-Looking Information
Statements in this report contain various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which represent the Company's expectations or beliefs
concerning future events. When used in this document and in documents
incorporated herein by reference, the words "expects," "plans,"
"anticipates," "believes," and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
include, without limitation, the Company's expectations concerning
operations and financial conditions, including changes in capacity,
revenues, and costs, future financing needs, overall economic
conditions, plans and objectives for future operations, and the impact
on the Company of its results of operations for the past three years
and the sufficiency of its financial resources to absorb that impact.
Other forward-looking statements include statements which do not
relate solely to historical facts, such as, without limitation,
statements which discuss the possible future effects of current known
trends or uncertainties, or which indicate that the future effects of
known trends or uncertainties cannot be predicted, guaranteed or
assured. All forward-looking statements in this report are based upon
information available to the Company on the date of this report. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events, or otherwise. Forward-looking statements are subject
to a number of risk factors that could cause actual results to differ
materially from our expectations. The following factors, in addition
to other possible factors not listed, could cause the Company's actual
results to differ materially from those expressed in forward-looking
statements: changes in economic, business and financial conditions;
the Company's substantial indebtedness; high fuel prices and the
availability of fuel; the residual effects of the war in Iraq;
conflicts in the Middle East or elsewhere; the highly competitive
business environment faced by the Company, with increasing competition
from low cost carriers and historically low fare levels; the ability
of the Company to implement its restructuring program and the effect
of the program on operational performance and service levels;
uncertainties with respect to the Company's international operations;
changes in the Company's business strategy; actions by U.S. or foreign
government agencies; the possible occurrence of additional terrorist
attacks; another outbreak of a disease (such as SARS) that affects
travel behavior; uncertainties with respect to the Company's
relationships with unionized and other employee work groups; the
inability of the Company to satisfy existing financial or other
covenants in certain of its credit agreements; the availability of
future financing; and increased insurance costs and potential
reductions of available insurance coverage. Additional information
concerning these and other factors is contained in the Company's
Securities and Exchange Commission filings, including but not limited
to the Company's Annual Report on Form 10-K for the year ended
December 31, 2003.
Overview
American's net loss was $182 million for the first quarter of 2004, an
improvement of $850 million over its $1.0 billion net loss for the
first quarter of 2003. American's operating loss was $25 million for
the first quarter of 2004, an improvement of $878 million over its
operating loss of $903 million for the first quarter of 2003.
The year-over-year improvement in the Company's operating results
reflects the benefit of the cost reduction initiatives in the
Company's restructuring program, which is described more fully under
Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report on Form 10-
K for the year ended December 31, 2003. In addition, passenger
traffic (revenue passenger miles) in the first quarter of 2004
exceeded the Company's expectations, reflecting continuing
improvement in the U.S. economy and increasing demand for air travel.
However, yield and unit revenues (passenger revenues per available
seat mile) remain depressed relative to historical measures because
of the Company's reduced pricing power, resulting mainly from greater
cost sensitivity on the part of travelers, especially business
travelers, and intensifying competition arising in part from the
growth of low-cost carriers and in part from the effects of
significant increases in overall industry capacity in 2004. In
addition, fuel prices remained high relative to the past several
years.
-8-
The Company continues to need to see improvement in the revenue
environment, additional cost reductions and further productivity
improvements before it can return to sustained profitability at
acceptable levels. In addition, the Company's ability to return to
sustained profitability at acceptable levels will depend on a number
of risk factors, many of which are largely beyond the Company's
control. Some of the risk factors that have had and/or may have a
negative impact on the Company's business and financial results are
referred to under "Forward-Looking Information" above and are
discussed in the Risk Factors listed in Item 7 (on pages 26-29) in the
Company's Annual Report on Form 10-K for the year ended December 31,
2003. In particular, if the revenue environment deteriorates beyond
normal seasonal trends, or the Company is unable to access the capital
markets to raise additional capital, it may be unable to fund its
obligations and sustain its operations in the long-term.
OTHER INFORMATION
Significant Indebtedness and Future Financing
During 2001, 2002 and 2003, the Company raised an aggregate of
approximately $8.4 billion of financing mostly to fund capital
commitments (mainly for aircraft and ground properties) and operating
losses. During the three months ended March 31, 2004, the Company
raised an additional $180 million of financing to fund capital
commitments and for general corporate purposes, and ended the quarter
with $3.2 billion of unrestricted cash and short-term investments. The
Company believes that it has sufficient liquidity to fund its
operations for the foreseeable future, including capital expenditures
and other contractual obligations. However, to maintain sufficient
liquidity over the long-term as the Company seeks to return to
sustained profitability at acceptable levels, the Company will need
continued access to additional funding. The Company's possible future
financing sources include: (i) a limited amount of additional secured
aircraft debt (virtually all of the Company's Section 1110-eligible
aircraft are encumbered), (ii) debt secured by other assets, (iii)
securitization of future operating receipts, (iv) sale-leaseback
transactions of owned aircraft and (v) the potential sale of certain
non-core assets. However, the availability and level of these
financing sources cannot be assured, particularly in light of the fact
that the Company has fewer unencumbered assets available than it has
had in the past.
The Company's significant indebtedness could have important future
consequences, such as (i) limiting the Company's ability to obtain
additional financing for working capital, capital expenditures,
acquisitions and general corporate purposes, (ii) requiring the
Company to dedicate a substantial portion of its cash flow from
operations to payments on its indebtedness, (iii) making the Company
more vulnerable to economic downturns, (iv) limiting its ability to
withstand competitive pressures and reducing its flexibility in
responding to changing business and economic conditions, and (v)
limiting the Company's flexibility in planning for, or reacting to,
changes in its business and the industry in which it operates.
-9-
Credit Facility Covenants
American has a fully drawn $834 million bank credit facility secured
by aircraft that expires December 15, 2005, which contains a liquidity
covenant and an EBITDAR (generally, earnings before interest, taxes,
depreciation, amortization and rentals, adjusted for certain non-cash
items) to fixed charges (generally, interest and total rentals) ratio
covenant. The required EBITDAR to fixed charges ratio was 1.1 to 1.0
for the three-month period ending March 31, 2004, and increases on a
quarterly basis up to 1.5 to 1.0 for each four consecutive quarters
ending after December 31, 2004. The liquidity covenant requires
American to maintain a minimum level of $1.0 billion of unrestricted
cash and short-term investments. The Company was in compliance with
these covenants as of March 31, 2004 and expects to be able to
continue to comply with these covenants. However, there are no
assurances that it will continue to be able to do so through the
expiration of the facility. Failure to comply with these covenants
would result in a default under this facility and could result in a
default under a significant amount of the Company's other debt.
Financing Activity
In February 2004, American issued $180 million of Fixed Rate Secured
Notes due 2009. These notes are secured by certain spare parts and
bear interest at 7.25 percent.
In addition, in February 2004, AMR transferred $315 million in
proceeds from its 4.5 percent senior convertible notes to American.
See Note 6 to the accompanying condensed consolidated financial
statements for additional information regarding debt guarantees.
Other Operating and Investing Activities
The Company's cost savings initiatives resulted in improved cash flow
from operations during the three months ended March 31, 2004,
compared to the same period in 2003. Net cash provided by operating
activities in the three-month period ended March 31, 2004 was $298
million, an increase of $912 million over the same period in 2003.
Net cash used for operating activities for the three months ended
March 31, 2003 included the receipt of a $515 million federal tax
refund offset by $216 million of redemption payments under operating
leases for special facility revenue bonds.
Pension Funding Obligation
The Company expects to contribute a minimum of approximately $433
million and $412 million to its defined benefit pension plans in 2004
and 2005, respectively. The Company's estimates of its defined
benefit pension plan contributions reflect the provisions of the
Pension Funding Equity Act of 2004, which was enacted in April 2004.
Of the $433 million minimum amount the Company expects to contribute
to its defined benefit pension plans in 2004, the Company contributed
approximately $213 million during the three months ended March 31,
2004 and an additional $106 million on April 15, 2004.
-10-
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 2004 and 2003
Revenues
The Company's revenues increased approximately $395 million, or 9.6
percent, to $4.5 billion in the first quarter of 2004 from the same
period last year. American's passenger revenues increased by 8.4
percent, or $284 million, on a capacity (available seat mile) (ASM)
increase of 5.8 percent. American's passenger load factor increased
2.0 points to 71.1 percent while passenger revenue yield per
passenger mile decreased by 0.4 percent to 12.14 cents. This
resulted in an increase in revenue per available seat mile (RASM) of
2.5 percent to 8.64 cents. Following is additional information
regarding American's domestic and international RASM and capacity:
Three Months Ended March 31, 2004
RASM Y-O-Y ASMs Y-O-Y
(cents) Change (billions) Change
Domestic 8.53 1.3% 29.5 2.5%
International 8.86 5.2 13.1 13.9
Latin America 9.40 (0.2) 7.1 21.8
Europe 8.21 8.0 4.9 5.8
Pacific 8.36 25.1 1.1 6.1
Regional affiliates' passenger revenues, which are based on industry
standard mileage proration agreements for flights connecting to
American flights, increased $94 million, or 28.8 percent, to $420
million as a result of increased capacity and load factors. Regional
affiliates' traffic increased 32.1 percent to 1.5 billion revenue
passenger miles (RPMs), while capacity increased 23.5 percent to 2.5
billion ASMs, resulting in a 4.1 point increase in the passenger load
factor to 62.7 percent.
Cargo revenues increased 10.4 percent, or $14 million, due to a 6.3
percent increase in cargo ton miles and a 4.0 percent increase in
cargo revenue yield per ton mile.
Operating Expenses
The Company's total operating expenses decreased 9.6 percent, or $483
million, to $4.5 billion in the first quarter of 2004 compared to the
first quarter of 2003. American's mainline operating expenses per ASM
in the first quarter of 2004 decreased 16.7 percent compared to the
first quarter of 2003 to 9.49 cents. These decreases are due primarily
to the Company's cost savings initiatives. The decrease in operating
expenses occurred despite a 7.4 percent increase in American's price
per gallon of fuel in the first quarter of 2004 relative to the first
quarter of 2003. The Company's operating and financial results are
significantly affected by the price and availability of jet fuel.
Additional increases in the price of fuel, or limits in the supply of
fuel, would adversely affect the Company's financial condition and
results of operations.
-11-
(in millions) Three Months
Ended Change Percentage
Operating Expenses March 31, 2004 from 2003 Change
Wages, salaries and benefits $ 1,521 $(468) (23.5)% (a)
Aircraft fuel 748 66 9.7 (b)
Regional payments 433 62 16.7 (c)
Depreciation and amortization 285 (12) (4.0)
Other rentals and landing fees 275 7 2.6
Commissions, booking fees and
credit card expense 288 33 12.9 (d)
Maintenance, materials and repairs 196 1 0.5
Aircraft rentals 148 (36) (19.6) (e)
Food service 136 (12) (8.1)
Other operating expenses 498 (99) (16.6) (f)
Special charges - (25) NM (g)
Total operating expenses $ 4,528 $(483) (9.6)%
(a)Wages, salaries and benefits decreased primarily due to lower
wage rates and reduced headcount primarily as a result of the Labor
Agreements and Management Reductions, discussed in the Company's 2003
Form 10-K, which became effective in the second quarter of 2003.
(b)Aircraft fuel expense increased primarily due to a 7.4 percent
increase in American's price per gallon of fuel (net of the impact of
fuel hedging) and a 2.2 percent increase in American's fuel
consumption.
(c)Regional payment increased primarily due to the 23.5 percent
increase in regional affiliates' capacity.
(d)Commissions, booking fees and credit card expense increased due
primarily to an 8.4 percent increase in the Company's passenger
revenues, particularly the 19.7 percent increase in American's
international passenger revenue, and a 28.8 percent increase in
Regional Affiliates' revenue.
(e)Aircraft rentals decreased due primarily to the removal of leased
aircraft from the fleet in the second half of 2003 as part of the
Company's restructuring initiatives and concessionary agreements with
certain lessors, which reduced future lease payment amounts and
resulted in the conversion of 30 operating leases to capital leases in
the second quarter of 2003.
(f)Other operating expenses decreased primarily due to decreases in
(i) technical and professional fees of $39 million, (ii) data
processing expenses of $16 million due primarily to introducing
further efficiencies into data processing environments resulting in
reduced consumption, and negotiating more favorable terms with vendors
in the second quarter of 2003; (iii) travel and incidental costs of
$12 million due primarily to decreased overnight stays for pilots and
flight attendants as a result of changes in the scheduling of flights,
lower average hotel rates, work rule changes and lower per diem
reimbursements; and increases in (iv) gains (or decreases in losses)
on disposal of assets of $14 million and (v) foreign exchange gains in
the first quarter of 2004 of $15 million.
(g)Special charges for 2003 included $25 million in severance
charges related to the Company's 2002 restructuring initiatives.
Other Income (Expense)
Other income (expense), historically a net expense, increased $28
million due primarily to the following: Interest expense increased
$11 million, or 7.4 percent, resulting primarily from the increase in
the Company's long-term debt. Miscellaneous-net increased $14 million,
due primarily to the accrual during the first quarter of 2004 of a $23
million award rendered by an independent arbitrator and relating to a
grievance filed by the Allied Pilots Association, somewhat offset by
the write-down during the first quarter of 2003 of certain investments
held by the Company.
Income Tax Benefit
The Company did not record a net tax benefit associated with its first
quarter 2004 and 2003 losses due to the Company providing a valuation
allowance, as discussed in Note 5 to the accompanying condensed
consolidated financial statements.
-12-
Outlook
Capacity for American's mainline jet operations is expected to
increase about eight percent in the second quarter of 2004 compared to
the second quarter of 2003 and about six percent for the full year
2004 compared to 2003, despite removing aircraft from the fleet and
reducing mainline departures. This is due to increased efficiencies,
driven by three factors: (i) American operated with a low base number
of flights in 2003 as a result of the war in Iraq and SARS, (ii)
American has added seats back to its Boeing 757 and Airbus A300
aircraft and (iii) as American realigns its mid-continent hubs and de-
peaks its Miami schedule, its aircraft productivity levels will
improve.
American previously stated a goal of improving its mainline unit costs
by ten percent for the full year, compared to 2003. However, based on
various factors, including primarily the Company's expectation that fuel
prices will remain high during 2004 compared to 2003, the Company
expects that its mainline unit costs will improve by approximately
eight percent for the full year compared to 2003 to approximately 9.3
cents for the full year. Although American will have a full year of labor
savings from its Labor Agreements and Management Reductions and more
fully realize the savings from its other strategic cost savings
initiatives, in addition to high fuel prices, there are significant
cost challenges in 2004 that may affect the Company's cost reduction
efforts. These challenges include medical benefits costs, airport
fees and maintenance, materials and repairs costs (due to flight hour
agreement contractual rate increases and the benefit from retiring
aircraft subsiding).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As of March 31, 2004, the Company had hedged, with option contracts,
approximately 16 percent of its estimated second quarter 2004 fuel
requirements, nine percent of its estimated third quarter 2004 fuel
requirements, four percent of its estimated fourth quarter 2004 fuel
requirements and an insignificant percentage of its estimated 2005 and
2006 fuel requirements.
There have been no material changes in market risk from the
information provided in Item 7A. Quantitative and Qualitative
Disclosures About Market Risk of the Company's 2003 Form 10-K.
Item 4. Controls and Procedures
The term "disclosure controls and procedures" is defined in Rules 13a-
15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the
Exchange Act. This term refers to the controls and procedures of a
company that are designed to ensure that information required to be
disclosed by a company in the reports that it files under the Exchange
Act is recorded, processed, summarized and reported within the time
periods specified by the Securities and Exchange Commission. An
evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), of the
effectiveness of the Company's disclosure controls and procedures as
of March 31, 2004. Based on that evaluation, the Company's
management, including the CEO and CFO, concluded that the Company's
disclosure controls and procedures were effective as of March 31,
2004. During the quarter ending on March 31, 2004, there was no
change in the Company's internal control over financial reporting that
has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.
-13-
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
On July 26, 1999, a class action lawsuit was filed, and in November
1999 an amended complaint was filed, against AMR Corporation, American
Airlines, Inc., AMR Eagle Holding Corporation, Airlines Reporting
Corporation, and the Sabre Group Holdings, Inc. in the United States
District Court for the Central District of California, Western
Division (Westways World Travel, Inc. v. AMR Corp., et al.). The
lawsuit alleges that requiring travel agencies to pay debit memos to
American for violations of American's fare rules (by customers of the
agencies): (1) breaches the Agent Reporting Agreement between American
and AMR Eagle and the plaintiffs; (2) constitutes unjust enrichment;
and (3) violates the Racketeer Influenced and Corrupt Organizations
Act of 1970 (RICO). The certified class includes all travel agencies
who have been or will be required to pay money to American for debit
memos for fare rules violations from July 26, 1995 to the present.
The plaintiffs seek to enjoin American from enforcing the pricing
rules in question and to recover the amounts paid for debit memos,
plus treble damages, attorneys' fees, and costs. The Company intends
to vigorously defend the lawsuit. Although the Company believes that
the litigation is without merit, a final adverse court decision could
impose restrictions on the Company's relationships with travel
agencies, which could have an adverse impact on the Company.
On May 17, 2002, the named plaintiffs in Hall, et al. v. United
Airlines, et al., pending in the United States District Court for the
Eastern District of North Carolina, filed an amended complaint
alleging that between 1995 and the present, American and over 15 other
defendant airlines conspired to reduce commissions paid to U.S.-based
travel agents in violation of Section 1 of the Sherman Act. The
plaintiffs are seeking monetary damages and injunctive relief. The
court granted class action certification to the plaintiffs on
September 17, 2002, defining the plaintiff class as all travel agents
in the United States, Puerto Rico, and the United States Virgin
Islands, who, at any time from October 1, 1997 to the present, issued
tickets, miscellaneous change orders, or prepaid ticket advices for
travel on any of the defendant airlines. The case is stayed as to US
Airways and United Air Lines, since they filed for bankruptcy.
American is vigorously defending the lawsuit. Defendant carriers
filed a motion for summary judgment on December 10, 2002, which the
court granted on October 30, 2003. Plaintiffs have appealed that
order to the 4th Circuit Court of Appeals, and that appeal remains
pending. A final adverse court decision awarding substantial money
damages or placing restrictions on the Company's commission policies
or practices would have an adverse impact on the Company.
Between April 3, 2003 and June 5, 2003, three lawsuits were filed by
travel agents some of whom have opted out of the Hall class action
(above) to pursue their claims individually against American Airlines,
Inc., other airline defendants, and in one case against certain
airline defendants and Orbitz LLC. (Tam Travel et. al., v. Delta Air
Lines et. al., in the United States District Court for the Northern
District of California - San Francisco (51 individual agencies), Paula
Fausky d/b/a Timeless Travel v. American Airlines, et. al, in the
United States District Court for the Northern District of Ohio Eastern
Division (29 agencies) and Swope Travel et al. v. Orbitz et. al. in
the United States District Court for the Eastern District of Texas
Beaumont Division (6 agencies)). Collectively, these lawsuits seek
damages and injunctive relief alleging that the certain airline
defendants and Orbitz LLC: (i) conspired to prevent travel agents from
acting as effective competitors in the distribution of airline tickets
to passengers in violation of Section 1 of the Sherman Act; (ii)
conspired to monopolize the distribution of common carrier air travel
between airports in the United States in violation of Section 2 of the
Sherman Act; and that (iii) between 1995 and the present, the airline
defendants conspired to reduce commissions paid to U.S.-based travel
agents in violation of Section 1 of the Sherman Act. These cases have
been consolidated in the United States District Court for the Northern
District of Ohio Eastern Division. American is vigorously defending
these lawsuits. A final adverse court decision awarding substantial
money damages or placing restrictions on the Company's distribution
practices would have an adverse impact on the Company.
-14-
On April 25, 2002, a Quebec travel agency filed a motion seeking a
declaratory judgment of the Superior Court in Montreal, Canada
(Voyages Montambault (1989) Inc. v. International Air Transport
Association, et al.), that American and the other airline defendants
owe a "fair and reasonable commission" to the agency, and that
American and the other airline defendants breached alleged contracts
with the agency by adopting policies of not paying base commissions.
The motion was subsequently amended to add 40 additional travel
agencies as petitioners. The current defendants are the International
Air Transport Association, the Air Transport Association of Canada,
Air Canada, American, America West Airlines, Delta Air Lines, Grupo
TACA, Northwest Airlines/KLM Airlines, and Continental Airlines.
American is vigorously defending the lawsuit. Although the Company
believes that the litigation is without merit, a final adverse court
decision granting declaratory relief could expose the Company to
claims for substantial money damages or force the Company to pay
agency commissions, either of which would have an adverse impact on
the Company.
On May 13, 2002, the named plaintiffs in Always Travel, et. al. v. Air
Canada, et. al., pending in the Federal Court of Canada, Trial
Division, Montreal, filed a statement of claim alleging that between
1995 and the present, American, the other defendant airlines, and the
International Air Transport Association conspired to reduce
commissions paid to Canada-based travel agents in violation of Section
45 of the Competition Act of Canada. The named plaintiffs seek
monetary damages and injunctive relief and seek to certify a
nationwide class of travel agents. Plaintiffs have filed a motion for
class certification, but that motion has not yet been decided.
American is vigorously defending the lawsuit. A final adverse court
decision awarding substantial money damages or placing restrictions on
the Company's commission policies would have an adverse impact on the
Company.
On August 14, 2002, a class action lawsuit was filed against American
Airlines, Inc. in the United States District Court for the Central
District of California, Western Division (All World Professional
Travel Services, Inc. v. American Airlines, Inc.). The lawsuit
alleges that requiring travel agencies to pay debit memos for
refunding tickets after September 11, 2001: (1) breaches the Agent
Reporting Agreement between American and plaintiff; (2) constitutes
unjust enrichment; and (3) violates the Racketeer Influenced and
Corrupt Organizations Act of 1970 (RICO). The alleged class includes
all travel agencies who have or will be required to pay moneys to
American for an "administrative service charge," "penalty fee," or
other fee for processing refunds on behalf of passengers who were
unable to use their tickets in the days immediately following the
resumption of air carrier service after the tragedies on September 11,
2001. On April 1, 2004, the court denied plaintiff's motion for class
certification. The plaintiff seeks to enjoin American from collecting
the debit memos and to recover the amounts paid for the debit memos,
plus treble damages, attorneys' fees, and costs. The Company intends
to vigorously defend the lawsuit. Although the Company believes that
the litigation is without merit, a final adverse court decision could
impose restrictions on the Company's relationships with travel
agencies which could have an adverse impact on the Company.
On August 19, 2002, a class action lawsuit seeking monetary damages
was filed, and on May 7, 2003 an amended complaint was filed in the
United States District Court for the Southern District of New York
(Power Travel International, Inc. v. American Airlines, Inc., et al.)
against American, Continental Airlines, Delta Air Lines, United
Airlines, and Northwest Airlines, alleging that American and the other
defendants breached their contracts with the agency and were unjustly
enriched when these carriers at various times reduced their base
commissions to zero. The as yet uncertified class includes all travel
agencies accredited by the Airlines Reporting Corporation "whose base
commissions on airline tickets were unilaterally reduced to zero by"
the defendants. The case is stayed as to United Air Lines, since it
filed for bankruptcy. American is vigorously defending the lawsuit.
Although the Company believes that the litigation is without merit, a
final adverse court decision awarding substantial money damages or
forcing the Company to pay agency commissions would have an adverse
impact on the Company.
-15-
Miami-Dade County (the County) is currently investigating and
remediating various environmental conditions at the Miami
International Airport (MIA) and funding the remediation costs through
landing fees and various cost recovery methods. American Airlines,
Inc. and AMR Eagle have been named as potentially responsible parties
(PRPs) for the contamination at MIA. During the second quarter of
2001, the County filed a lawsuit against 17 defendants, including
American Airlines, Inc., in an attempt to recover its past and future
cleanup costs (Miami-Dade County, Florida v. Advance Cargo Services,
Inc., et al. in the Florida Circuit Court). In addition to the 17
defendants named in the lawsuit, 243 other agencies and companies were
also named as PRPs and contributors to the contamination. American's
and AMR Eagle's portion of the cleanup costs cannot be reasonably
estimated due to various factors, including the unknown extent of the
remedial actions that may be required, the proportion of the cost that
will ultimately be recovered from the responsible parties, and
uncertainties regarding the environmental agencies that will
ultimately supervise the remedial activities and the nature of that
supervision. The Company is vigorously defending the lawsuit.
In April 2004, a lawsuit was filed against American captioned Kimmell
v. AMR, et al. This is a purported class action filed in federal
district court in Dallas. The suit arises from the disclosure of
passenger name records by a vendor of American Airlines. It alleges
various causes of action, including but not limited to violations of
the Electric Communications Privacy Act, negligent misrepresentation,
breach of contract, and violation of alleged common law rights of
privacy. American has not yet been served with the suit.
-16-
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
10.1 American Airlines, Inc. 2004 Employee Profit Sharing Plan,
incorporated by reference to Exhibit 10.1 to AMR's report on Form 10-Q
for the quarterly period ended March 31, 2004.
10.2 American Airlines, Inc. 2004 Annual Incentive Plan, incorporated
by reference to Exhibit 10.2 to AMR's report on Form 10-Q for the
quarterly period ended March 31, 2004.
10.3 Amended and Restated Executive Termination Benefits Agreement
between AMR, American Airlines and Jeffrey J. Brundage dated April 1,
2004, incorporated by reference to Exhibit 10.5 to AMR's report on
Form 10-Q for the quarterly period ended March 31, 2004.
12 Computation of ratio of earnings to fixed charges for the three
months ended March 31, 2004 and 2003.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32 Certification pursuant to Rule 13a-14(b) and section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350,
chapter 63 of title 18, United States Code).
Form 8-Ks filed under Item 5 - Other Events
On March 18, 2004, American filed an amended report on Form 8-K (Form
8-K/A No. 1) to provide actual fuel cost, unit cost and capacity and
traffic information for January and February as well as current fuel
cost, unit cost and capacity and traffic expectations for March, the
first quarter and the full year 2004.
Form 8-Ks filed under Item 7 - Financial Statements and Exhibits
On February 25, 2004, American filed a report on Form 8-K to provide
Exhibits with reference to the Registration Statement on Form S-3
(Registration No. 333-110760-01) of American Airlines, Inc.
Form 8-Ks furnished under Item 9 - Regulation FD Disclosure
On March 17, 2004, American furnished a report on Form 8-K to furnish
actual fuel cost, unit cost and capacity and traffic information for
January and February as well as current fuel cost, unit cost and
capacity and traffic expectations for March, the first quarter and the
full year 2004.
Form 8-Ks filed under Item 12 - Disclosure of Results of Operations
and Financial Condition
On January 21, 2004, American furnished a report on Form 8-K to
furnish a press release issued by AMR to announce AMR's and American's
fourth quarter and full year 2003 results.
-17-
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMERICAN AIRLINES, INC.
Date: April 23, 2004 BY: /s/ James A. Beer
James A. Beer
Senior Vice President and Chief
Financial Officer
(Principal Financial and Accounting Officer)
-18-
Exhibit 12
AMERICAN AIRLINES, INC.
Computation of Ratio of Earnings to Fixed Charges
(in millions)
Three Months Ended March 31,
2004 2003
Earnings (loss):
Loss before income taxes $ (182) $(1,032)
Add: Total fixed charges (per below) 368 385
Less: Interest capitalized 17 18
Total earnings (loss) before income taxes $ 169 $ (665)
Fixed charges:
Interest $ 160 $ 150
Portion of rental expense representative of
the interest factor 206 233
Amortization of debt expense 2 2
Total fixed charges $ 368 $ 385
Coverage deficiency $ 199 $ 1,050
Note:As of March 31, 2004, American has guaranteed approximately
$1.3 billion of AMR's unsecured debt and approximately $484
million of AMR Eagle's secured debt. The impact of these
unconditional guarantees is not included in the above computation.
Exhibit 31.1
I, Gerard J. Arpey, certify that:
1.I have reviewed this quarterly report on Form 10-Q of American
Airlines, Inc.;
2.Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3.Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this report;
4.The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b)Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c)Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5.The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 23, 2004 /s/ Gerard J. Arpey
Gerard J. Arpey
President and Chief Executive Officer
Exhibit 31.2
I, James A. Beer, certify that:
1.I have reviewed this quarterly report on Form 10-Q of American
Airlines, Inc.;
2.Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3.Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this report;
4.The registrant's other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this report is being prepared;
(b)Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c)Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
5.The registrant's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons
performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 23, 2004 /s/ James A. Beer
James A. Beer
Senior Vice President and Chief
Financial Officer
Exhibit 32
American Airlines, Inc.
Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002
(subsections (a) and (b) of section 1350, chapter 63 of title 18,
United States Code), each of the undersigned officers of American
Airlines, Inc., a Delaware corporation (the Company), does hereby
certify, to such officer's knowledge, that:
The Quarterly Report on Form 10-Q for the quarter ended March 31,
2004 (the Form 10-Q) of the Company fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act
of 1934 and information contained in the Form 10-Q fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
Date: April 23, 2004 /s/ Gerard J. Arpey
Gerard J. Arpey
President and Chief Executive Officer
Date: April 23, 2004 /s/ James A. Beer
James A. Beer
Senior Vice President and Chief
Financial Officer
The foregoing certification is being furnished solely pursuant to
section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and
(b) of section 1350, chapter 63 of title 18, United States Code) and
is not being filed as part of the Form 10-Q or as a separate
disclosure document.
